Hard times still ride rails

Officially, the recession likely is over, but the trains that haul the freight that chugs through the economy still aren’t burning up the tracks.

The volume of train freight is particularly important in Indiana and Ohio, two of the states most heavily served by railroads. But one of the area’s biggest manufacturers says rail freight isn’t a perfect indicator of an economy that’s lurching out of recession.

Fort Wayne-based Steel Dynamics Inc. is relying more heavily on trucks than it has in the past because manufacturers with depleted inventories need steel quickly.

“Truck shipments are through the roof,” said Craig Longardner, manager of materials and transportation at Steel Dynamics Inc.’s flat-roll mill in Butler.

But economists still consider train freight a key economic indicator because it’s a measure of economic activity. In October, the Wall Street Journal ran freight rail statistics in its “Vital Signs” section.

Rail freight volumes are especially important to Indiana and Ohio.

Indiana is the 38th-largest state in terms of square mileage; Ohio is 34th. But the two states rank ninth and fourth, respectively, when it comes to total rail miles in their territory.

“Indiana is just crisscrossed by rail lines,” said Warren Flatau, a spokesman for the Federal Railroad Administration.

Current railroad-employment figures by state are hard to come by. But in 2007, 6,141 people worked for railroads in Indiana and 7,943 in Ohio.

Nationally, railroad employment stood at 147,097, according to the Surface Transportation Board of the U.S. Department of Transportation. That was down 10 percent from November 2008 and 11 percent from November 2007. Similar losses in Indiana and Ohio would mean hundreds of unemployed rail workers in each state.

The Association of American Railroads, an industry group, doesn’t track railcar loadings by state, spokeswoman Holly Arthur said. Neither does the Indiana Department of Transportation. And the two major rail companies serving Indiana and Ohio, CSX Corp. and Norfolk Southern Corp., don’t report state-level data in their financial reports.

But the nationwide numbers appear to indicate that rail traffic is down badly.

“Good riddance to 2009,” the association of railroads said in its Rail Time Indicators report for Jan. 13.

Freight railroads carried 13 million carloads in 2009 – 16.1 percent less than in 2008 and 18.2 percent less than in 2007, the report said.

And 2010 appears to be no better. Carloads numbered 236,796 for the week that ended Jan. 9, the railroad association reported in its most recent Weekly Rail Traffic Summary. That’s down 12.4 percent compared with the same week in January 2009 and 28 percent compared with the same week in January 2008.

Another measure of how sluggish rail traffic has been is the number of cars in storage – usually sitting idle on unused tracks or sidings.

As with rail traffic, the association of railroads doesn’t track the number of cars in storage on a state-by-state basis. But nationally, the organization reported 449,000, or 29 percent of all cars, in storage as of Jan. 1. That’s down from the half million, or 32 percent of all cars, in storage in June and July.

“It’s still far, far higher, though, than the 2 percent to 3 percent of cars in storage when the economy is healthy,” the association’s Rail Time Indicators report said.

Norfolk Southern has the second-most miles of railroad in Indiana and the most in Ohio. It doesn’t track traffic or idle railcars by state, but spokesman Rudy Husband said that at the beginning of the year, 20,000 of the company’s 90,000 cars were in storage.

Husband declined to comment on the outlook for Norfolk Southern in advance of a quarterly earnings call with investors scheduled for Wednesday. CSX, with the most railway miles in Indiana and second most in Ohio, didn’t return calls.

But SDI says the economic recovery might be bad for railroads in the short run.

Longardner declined to disclose the number of railcar and truckloads of steel shipped from the Butler mill for competitive reasons.

But he said the Butler mill is close to its record number of truckloads of steel departing each day. Meanwhile, it’s far from its record for railcars, Longardner said.

Possibly supporting Longardner’s analysis, the American Trucking Association reported its highest truck-tonnage index in a year in November, the most recent month for which such statistics are available.

Rail traffic should begin to recover in the coming months if the overall economic recovery continues, Longardner said. “I think when we see inventory build back up, we’ll see train shipments increase,” Longardner said.